Del Monte Pacific sees return to profitability
FOOD conglomerate Del Monte Pacific Ltd. (DMPL) booked a net loss of $12 million in the May to July period – the first quarter in its fiscal year 2016 – in a weak US season alongside the El Niño-induced dryspell that curbed its Philippine pineapple production.
For this quarter, DMPL posted a 6-percent year-on-year growth in sales reaching $472.8 million, resulting in the decline in the net loss compared to the prior year’s loss of $22 million, the company reported to the Philippine Stock Exchange on Friday.
“We have successfully laid a solid foundation from which we will execute our growth plans in the coming quarters. Barring unforeseen circumstances, we look forward to a return to profitability in full-year 2016, which will generate more free cash flow to allow us to deleverage further,” DMPL managing director and chief executive officer Joselito Campos Jr. said in a press statement on Friday.
In early 2014, DMPL’s $1.675-billion acquisition of the consumer food business of American corporation Del Monte Foods (DMFI) allowed the group to break into the American market and reunite with its mother brand in the United States but also increased its debt stock and interest expenses.
The net loss for the quarter was attributed to the first quarter being the seasonally weakest for its US operations under Del Monte Foods Inc. (DMFI), in addition to expenses from the implementation of SAP (an acronym for systems, applications and products used as branding for a popular customer and business management software).
“The El Niño weather pattern also caused reduced pineapple supply in the group’s plantation in the Philippines leading to lower exports,” the company reported.
The US unit DMFI generated higher sales, achieved higher gross margin and recorded a higher gross profit, but due to seasonality it incurred a net loss for the quarter, the company said. However, DMPL said market share across core retail segments had maintained their strength, noting that “DMFI further developed partnerships with key retailers through investments in effective marketing and innovation.”
US sales grew by 10 percent year-on-year while sales in the Philippines rose by 7 percent over the same period.
“Our financial performance tends to be skewed towards the second half of our fiscal year when Del Monte is the brand of choice for festive occasions. As we continue to unlock the growth potential of our products, accelerate our penetration of the food service sector and ethnic Asian market as well as enter new vegetable segments, our results will improve further,” said Nils Lommerin, CEO of DMFI.
The 7-percent growth in Philippine sales was attributed to increased demand for packaged mixed fruit and beverage.
Sales of the S&W branded business in Asia and the Middle East rose by 10 percent year-on-year in the first quarter, attributed to the strong performance of fresh pineapple exports that offset weakness in the packaged segment as a result of constrained supply.
Meanwhile, DMPL’s share of loss in the FieldFresh joint venture in India was lower at US$0.4 million from US$0.6 million in the prior year period. This was traced by the company to the robust performance of Del Monte packaged business, primarily led by improved volume in canned juice, olive oil and pasta.
